>> this is al jazeera america, i'm tony harris with today's top stories. the air force has 34 launch officers have been implicated in a cheating scandal and others have been implicated in a drug probe. the officers operate the nation's nuclear missiles. the u.n. blasts the catholic church for how it has handled sex abuse cases. a charity says the church continues to harbor perpetrators and deny accountability. the house of representatives approve a bipartisan deal. the spending measure will approve for the next two years.

now it will move to the senate for a vote later this week. a report says the attack on the consolidatonthe consulate id have been prevented. and renewing a $380 million pledge to help syrians affected by the war. the united nations says $2.4 billion has been raised so far. i'm tony harris, ali velshi is next with "real money" on al jazeera america. >> you've got good credit but no luck getting a loan to buy a house. your luck may be about to change. i'll tell i couldn't banks might be in a lending mood. report card time for your investments. what this earning season says about our economy and your

chance of landing a job. plus we check out a factory in the rust belt that makes robots. i'm ali velshi, this is "real money." ♪ >> this is "real money." you're the pos most important pt of the show. join us on twitter and facebook. seven years after the bubble burst america's housing market is back on its feet fueled in part by a streak of historically low interest rates. ironically tougher lending standards made it harder for millions of americans to take advantage of those lower rates, and it seems tougher now that rates are rising again. once an upon a time a steady income, a good credit score and some cash for a down payment

made it eas easy to buy a home. many people unable to take advantage of good rates from existing homeowners refinancing their mortgages. but recently the banks got a scare. the boom financing of 2013 fell off a cliff in the final three months of the year. america's two biggest home lenders are seeing huge drops of mortgages which sees homes refinance and purchases. we wills fargwells fargo report. jp morgan reported a 54% drop. it could be rising rates, we don't know. even though rates are inching up it may be easier for people to lock in a loan going forward. we've seen lenders relax loan standards modestly. the national average fico score

or credit score used by a lenders ability to pay back inched lower in 2013. in december the average score dropped to 727 according to a mortgage software firm. that's down from the priest years' average score. banks are looking to lend, and banks are loosening up. this all had have you had big implications for consumer lending. who better to discuss that then sheila baird. she led the banks' regulatory agency through the financial meltdown and the biggest wave of bank failures since the savings and loans crisis in the 1980's. sheila, good to see you again. thank you for being with us. >> reporter: thank you. >> you need a lower credit score to secure a better rate. i'm puzzled if that's good, how

low it should get. it got low and we got ourselves in a financial crisis. what is the weak spot for that sort of thing? >> i don't know if it should be all about credit scores. we should be looking accountability to repay. do you have a good credit history. this may be reflected by the credit score and other factors. do you have enough income to cover mortgage payments, do you have enough of a down payment? that's important. the variety of underwriting factors that banks traditionally looked at and did so quite successfully been the advent of the securitization. >> sheila, i've known you for 30 years, it doesn't matter. they're going to give a loan and sell it off to somebody else. >> there are a lot of small banks who do portfolio lending, but not so much with the private markets. that doesn't exist right now. it exploded during the crisis and hasn't come back yet, which

may an good thing. i think some balanced lending standards is good. but we certainly don't want to get back to where we were prior to the crisis. we had too much mortgage lending prior to the crisis. it was an unsustainable engine of consumption. beam doing these serial cashout refis with mortgages they couldn't afford. we don't want to go back to that. but some balanced approach to lending standards is good. you know, i think the fact that interest rates are going up, long-term rates are going up. you and i talked about this before. they could make more of a spread now, a return on the return that may give them incentives to lend. also doing purchase originations. most of this has been refinancings and that puts extra money in homeowners pockets, the ones who can qualify but it does not heal the housing market. the refinancing declining my

encourage banks, which will help the housing markets but they need to do it in a balanced, and well under-written way. >> the government's role increased dramatically in 2008 after spending $187 billion to bail out fannie mae and freddie mac, and that allows the banks to make more loans. the mortgages that fanny and freddy buy are held in investments or securitized, they're bundled and sold off to investors. they were created to help increase homeownership amongst the middle class. you think now that they've paid back, and they're so big in the system, you think its time to say good buy to these organizations? >> this is a huge risk, as long as the economy continues to improve we're okay, but taxpay taxpayers are guaranteeing 90%

of mortgage origination in this country. it's a huge expose. should we have another down turn those mortgages become troubled i would like to see the private sector take responsibility of taking the risk and doing it in a responsible way. house something a manifestation of a healthy economy. it can't really drive the economic growth. we need to produce things, we need jobs and real wage increases. that's what gives us a healthy economy, and the housing market will improve if we have those things. but to think that the housing market can drive it, that's not sustainable. i think we subsidize housing too much to the neglect of other industries that could give us more sustainable growth. >> and canada has the similar homeowner rates. >> without the subsidies, that's exactly right, and it's not clear if it helps so much, it

may make housing more expensive, but it's not clear if it expands homeownership. >> we need businesses which take risk and end up having riskier loans to get financing. how do you feel about the market for businesses trying to raise money? >> commercial loans seem to be picking up a little bit. that's the kind of lending we want to see. that's what is going to drive economic growth and job creation. that seems to be picking up a bit again. you want pro dent commercial lending. we saw abuses in commercial real estate lending especially during the crisis. we need to make sure that banks used good solid underwriting standards. that's picking up again. the interest rates are picking up and that will inprove making loans. i think it sounds southern

intuitive but i think you'll get more loans with those rising rates. >> now the chair of the pew systemic risk council. jc penneys says it's closing stores. they have struggled with management changes and sales have suffered. most of the stores slated to close are mostly in the midwest with five in wisconsin alone. j.c. penney says it will sta ste $65 million a year. approving the spending bill to fund the government until october. the bill fills in the details of the budget that was passed last month and funds nearly every government agency. it's expected to sail through the senate later on this week.

and it's record card time for cooperate america. i'll explain why corporate corps matter. and we'll talk to one boss that says there is increase demand for human workers.

>> it's that time again when companies showed their cards to wall street and revealed how much money they made in three months. think of earnings as a report card that tells investors how well, a business is executing on its mission to grow and prosper. it's important to the economy because growing economies are in a better position to create jobs. it will pay attention not just

to earning numbers but how the companies are producing them. >> reporter: it pushed interest rates down and stock records high as investors chased higher returns. but as the stimulus tide reseeds, investors may have to be more discerning. >> investors will need to see a strong turn around particularly earnings to validate the gains we have seen in the market last year. >> reporter: street watchers expect total earnings to be up nearly 9.9% this year compared to 4.6% last year. how those earnings are generated, though, will be closely watched. since the recovery many firms have kept profits up by keeping costs down. this year sales growth will be key with revenues with the s&p expected to climb 725% compared to barely 1% for 2013. >> the expectation now is that

as the economy ramps up to improve growth pace in 2014 and beyond, they'll give companies the top line revenue gains which will translate into double digit earnings growth. >> reporter: even if you're not invested in the stock market, it is a barometer of the nation's health. it gives them more incentives to create jobs. >> i think two sectors that you're going to see in 2014 coming down the pike that will have great economic growth and employment growth are the tech sector and energy sector. >> reporter: some market watchers expect hardware firms such as chip makers to do well this year. >> i you like technology, the hardware area, hardware from the 90's you've seen great growth. you've seen a winnowing of that

industry. >> reporter: the build out of energy in the united states means the beneficiaries of supply do better. transportation, truckers, air, the people who are making the build out, industrial companies, pipelines, you go to the beneficiaries of more supply. >> reporter: but while most are expecting earnings growth to be on the plus side remember last year's optimistic forecast fell wide of the mark. >> the expectations have steadily been coming down for the next four to six quarters and i think that trend will continue in 2014 as well. >> one big question about corporate earnings is how rising interest rates will effect 2014 particularly financial firms like banks which you may have in your 401k. strong profits like bank of america send the s&p to a record after they reported better results on wall street than

expect: let's dig deeper into thiwhat this week's earnings tel us. witnotable sale ratings on countrywide, washington mutual, fannie mae and freddie mac. last year james launched a global hedge fund, and he joins me now. good to see you. >> good to see you, too. >> you watched this remarkably healthy banking through the mortgage crisis and out again. for those of us who lose track of this, how healthy is our banking system. >> it's back to healthy. it's healthier than it was pre-crisis as evidenced by the terrible crisis. but it's not the v-shaped recovery that we were hoping for in the depth of the crisis but it's truly a recovery and a

strong one albeit slowly and protracted. >> what are you measuring that by, stock price, how healthy and safe the banks are? >> there are three things that i care about most. i care about credit, which has already improved, and is flattening out. i care about volume growth which is a drew indicator of how the economy is doing and the margin the banks make on those volumes. on three aspects volumes is probably one part that is not recovering as well as i would like. credit came first and impacted bank earnings positively. now we're anticipating rates to rise, and that's very good. the margins that banks can make on the loans that they have on their balance sheet. >> that's the counter intuitive part. people are fearful when rates go up. but banks make more money when rates go up. >> most banks are asset sensitive, they make more money

as interest rates go up. the problem is volumes right now. as you pointed out, mortgage volumes have really disappointed so far with the three banks that have reported. bank of america was a lot better than expected but still purchase volumes the most important in terms of an indicator of the housing economy, fell 22%. >> explain this to me. if you think rates are going up, which is what we all kind of think, wouldn't that cause people to lock in the purchase? why wouldn't we drop? >> it could be related to the fact that christmas fell on a wednesday and people took two weeks off instead of one week off, in which case we can expect a search at the beginning of this year. which would be nice. we'll stand by for that. but it has to do with most purchasers anticipated rates to rise, and then all the news on tapering came out, and now it's happening.

there was a blip before. now we missed it, the rates are going up and now that is behind us. >> maybe people who were going to buy a house aren't. >> i think with all the different asset types mortgages is the type of loan that is not growing quarter on quarter. >> let me ask you what sheila baird said about fannie mae and freddie mac. she said that the private sector could make that up, do you agree? >> far be it from me to argue with the ex-chairman of the industry. a lot of banks are so big if they get in trouble again it will revert to the taxpayers that it did last time. i don't think now is the right time for great reformation of the mortgage sector. because the recovery is there but slow and protracted, and because the one area of weakness in terms of volume growth for bank is the mortgage area, i

want to just leave it alone for now. there are a lot of things you can do sides privatize fanny and freddy. i don't think there is any reason for there to be two of them. the competition is not necessarily a good thing. and at the same time as you mentioned before they have two businesses. they have a portfolio of inventory that they hold on balance sheets and then they have a guarantee business. the gfe business can. >> the guarantee that you'll pay your loan. >> we need that, whether it's owned by the government or owned by the private sector. that other business, the balance sheet business i think that needs to go away and continue to roll off at an accelerated pace because there is no purpose for it. >> no reason for the government to be involved. >> good to see you as always. >> portfolio management. coming up next, the robot does not mean that your job is in jeopardy. it might mean the opposite. we'll have that and more as "real money" continues.

>> lisa fletcher with what is coming up on "the stream" . a number of books challenge or banned across the united states last year. >> right, we're looking at the why and the select actual

freedom and community values. >> i want my kids exposed to the braddest range available, but some people want more of a voice of what their kids read. >> that's a critical part of the discussion. introducing literature responsebly, freedom and the standards of the community. >> that's right after "real money." >> manufacturers in new york state say business conditions this month are the britney spears they've seen in more than a year. factories are getting more new orders and shipping more goods. manufacturing recovery is important ingredient in the

recovering economy. and president obama announced the creation of a high tech manufacturing institute in north carolina. the idea is to boost job creation by establishing hubs where universities and businesses develop a new generation of manufacturing technology. think robots. robots are part of the business that makes automated vehicles that lift things. you say that ough automation for robots. >> what we're seeing with our customer base is workers are not eliminated, they're just shifted to different work within those

facilities, in essence into more value added work. we have customers where no jobs are lost, but because labor is not wasted on really low level, very little value-added activities moving material from point-a to point-b, productivity increases. we've had customers who have done internal case studies that have shown nolos in workers, revenue has been driven without increasing the cost. >> we've got a robot moving around behind you as we talk. in 2013, 353% increase in those trial orders. you increased staff as well by 10%. where are you getting this increased demand from, and do you foresee it continuing i in 2014? >> we absolutely do think it's going to continue in 2014. it has primarily been in the manufacturing area. where we're seeing that demand

is primarily in heavy manufacturing industries, white goods, automotive industries. tier-one suppliers making heavy use of technology as they try to improve the productivity of their operations, and really make themselves more competitive in worldwide marketplace and enable them to grow. >> and you were named one of 500 fastest growing companies. you've got a relationship with toyota. tell me what that is about. >> well, what we've done is we sell our own brand of trucks that are propelled by our proprietary system that provides mapping navigation technology to industrial trucks. we're working with original equipment manufacturers to put our technology on their brand of forklifts, and toyota is our first customer in that area. >> tell me where that is, i

mean, is there going to be a lot more automation in the auto industry? >> i think it's a continuing trend. there has been a lot of utah imagination using robots for painting, our technology is very flexible. it adopts to the changing environment that manufacturers are seeing today where they had to change their assembly lines often. our technology supports that, and i think you're going to see an increased use in technology once again as they try to improve productivity to get more out of the manufacturing footprint. >> thank you for joining us. today on twitter and facebook, what is more important, cost of a product or where it's manufactured? shady said it's directly relat

related. >> coming from something called the beige book released eight times a year by the somewhat gray federal reserve. the book is full of anecdotes collected by 12 fed districts in late december taken together the book released today paints a picture of a healthier economy and read a little deeper and you'll find manufacturing in the dallas district, he one manufacturer said his firm has too many jobs to bid on. that's a first since the recession. in the boston area one frozen fish producer talks about prices of fish and haddock going through the roof. in kansas city, weaker demand for pork from asian marks is pushing hog prices lower and one

business owner in the cleveland district reported a slow down in sales of teen clothing and school items throughout 2013. he blamed high teen unemployment. it's a good reminder that the u.s. economy is not monolithic entity of reports and numbers but millions of businesses spread across thousands of cities each with it's very own story to tell. that's our story for today. i'm ali velshi. thanks for joining us.

>> hi, i'm lisa fletcher and you're in the stream. the number of books being challenged or banned is on the rise. we look at why in the intersection of education and community values. >> our digital producer wajahat ali is here. it's hard to believe that books like "to kill a mockingbird" was on that